As far as the UK goes the financial sector is as big as it ever was, despite four years of the government supposedly wanting to rebalance the economy away from finance.
Of course the reason why the UK still has such a large financial sector is that out of the four major banking groups, three effectively went bust but were bailed out by the UK government (in Barclays case by middle eastern sovereign wealth funds.)
If the government had adopted the strategy suggested by Joseph Stigler, which was to tell the banks to sort out their own problems, the finance section would have shrunk a lot.
In effect the risk taking of finance was transferred to the citizenry.
Ireland is going to be suffering the effects of socialising the debts of it's banks and therefore protecting private "risk takers" (hah!) for the next 30 years at minimum, which is 1 third the current lifetime of Ireland as an independent state.
What a complete joke.
Honestly makes me wish our paramilitary organisations would do something useful for a change.
I am not optimistic about Europe's future if the bugbear of the financial sector cannot be tackled, and the UK is a major roadblock in that regard, so I look forward to them leaving the Union.
Da Boss wrote: Ireland is going to be suffering the effects of socialising the debts of it's banks and therefore protecting private "risk takers" (hah!) for the next 30 years at minimum, which is 1 third the current lifetime of Ireland as an independent state.
What a complete joke.
Honestly makes me wish our paramilitary organisations would do something useful for a change.
I am not optimistic about Europe's future if the bugbear of the financial sector cannot be tackled, and the UK is a major roadblock in that regard, so I look forward to them leaving the Union.
Da Boss wrote: I am not optimistic about Europe's future if the bugbear of the financial sector cannot be tackled, and the UK is a major roadblock in that regard, so I look forward to them leaving the Union.
Yeah, sure.
Correct me if I'm mistaken, but I think the current EU Commission President may be a former prime minister of a tax haven where bank secrecy still exists.
Every body should have done as Iceland did, told the banks to sort it out themselves.
This mess cannot be stopped, but it can be survived in reasonable comfort.
Encouraging people to rely on social media to organise protest is pretty incredulous if they do believe a big revolution is coming. Why would people think that these avenues would remain open to public access?
I know that sounds a bit tinfoil hat, but it's just in response to the "revolution imminent" frame of mind.
loki old fart wrote: Every body should have done as Iceland did, told the banks to sort it out themselves.
Iceland made the right choice given their specific circumstances. But their specific circumstances involved large debts that were almost entirely offshore, and similarly large amounts of deposits by non-nationals in government owned banks. They were able to walk away from those merchant banks without tanking their own retail banking or housing sector. Iceland made the right choice given their circumstances, and good luck to them.
For the US, UK and others that had a much more complex problem, it's false to argue they should have just done the same as Iceland. The consequences would have been vastly different.
loki old fart wrote: Every body should have done as Iceland did, told the banks to sort it out themselves.
Iceland made the right choice given their specific circumstances. But their specific circumstances involved large debts that were almost entirely offshore, and similarly large amounts of deposits by non-nationals in government owned banks. They were able to walk away from those merchant banks without tanking their own retail banking or housing sector. Iceland made the right choice given their circumstances, and good luck to them.
For the US, UK and others that had a much more complex problem, it's false to argue they should have just done the same as Iceland. The consequences would have been vastly different.
The consequences of what they did and didn't do are still with us. They did put the financial heath of the country at risk with debt.
The austerity measures leading to under fed children, people needing to visit food banks. The rate of evictions and suicides up.
They didn't prosecute the bankers for fraud, They didn't legislate to make it impossible too do this again.
Well, the logo has that that awful white-on-red color scheme, with some old fashioned hat nobody under 80 has any right associating with and the group is called the "Renegade Economist" . You combine that with the title and I'm just going to assume this is a bunch of neckbeard-ascendant level "Smarter than the mainstream" bull honkey. Didn't watch. But i'll give it a 3/10, the extra two is for the gold standard, sheeple.
Chongara wrote: Well, the logo has that that awful white-on-red color scheme, with some old fashioned nobody under 80 has any right associating with and the group is called the "Renegade Economist" . You combine that with the title and I'm just going to assume this is a bunch of neckbeard-ascendant level "Smarter than the mainstream" bull honkey. Didn't watch. But i'll give it a 3/10, the extra two is for the gold standard, sheeple.
loki old fart wrote: The consequences of what they did and didn't do are still with us.
Of course there were consequences from the chosen course of action. What I said was that the consequences of choosing not to bail out the banks would have been vastly different (ie catastrophically severe) compared to Iceland.
The austerity measures leading to under fed children, people needing to visit food banks. The rate of evictions and suicides up.
Austerity is straight up terrible policy. I had a thread running for a while here on dakka going through each part of the collapse of the academic foundations for austerity.
But the bail out and austerity are not related. Choosing one doesn't mean you also have to do the other.
They didn't prosecute the bankers for fraud, They didn't legislate to make it impossible too do this again.
Both of which should have happened, but in neither case was the bail out the reason they weren't enacted.
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Chongara wrote: Well, the logo has that that awful white-on-red color scheme, with some old fashioned nobody under 80 has any right associating with and the group is called the "Renegade Economist" .
Oh, it's those guys? They're pro-gold standard, and therefore complete nutters with nothing useful to say about anything. There's nothing to see here people.
loki old fart wrote: The consequences of what they did and didn't do are still with us.
Of course there were consequences from the chosen course of action. What I said was that the consequences of choosing not to bail out the banks would have been vastly different (ie catastrophically severe) compared to Iceland.
The austerity measures leading to under fed children, people needing to visit food banks. The rate of evictions and suicides up.
Austerity is straight up terrible policy. I had a thread running for a while here on dakka going through each part of the collapse of the academic foundations for austerity.
But the bail out and austerity are not related. Choosing one doesn't mean you also have to do the other.
They didn't prosecute the bankers for fraud, They didn't legislate to make it impossible too do this again.
Both of which should have happened, but in neither case was the bail out the reason they weren't enacted.
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Chongara wrote: Well, the logo has that that awful white-on-red color scheme, with some old fashioned nobody under 80 has any right associating with and the group is called the "Renegade Economist" .
Oh, it's those guys? They're pro-gold standard, and therefore complete nutters with nothing useful to say about anything. There's nothing to see here people.
So your prefer your currency backed by what.? fantasy ? A set of numbers made up because they look good?
Kilkrazy wrote: Currency isn't a thing, it is a belief that the medium of exchange actually will be exchangeable for something useful in the future.
As such it depends on the confidence level of the public in the indefinite sustainability of the general basis of economic life.
Exactly, your currency has value, because I think it has. My currency has value, because you think it has. Value based on confidence.
But which would you prefer.
10,000 in paper money?
10,000 in gold or silver?
!0,000 in land or property?
Kilkrazy wrote: Currency isn't a thing, it is a belief that the medium of exchange actually will be exchangeable for something useful in the future.
As such it depends on the confidence level of the public in the indefinite sustainability of the general basis of economic life.
But which would you prefer.
10,000 in paper money?
10,000 in gold or silver?
!0,000 in land or property?
Well. 10,000 in Gold and/or Silver is extremely prone to being stolen. So I'm either going to have to pay hefty storage fees, or invest in some kind of security. The prices aren't the most stable thing in world and I personally have my sights on short term savings (~5 Years) when I'm going to need my money free to spend.
Land is nice but $10,000 is either going to buy me a postage stamp, or something pretty marginal and out of the way. I'm not going to be able to use it for much and depending on the land I may even have responsibilities towards up-keeping it. I'm not familiar enough with property tax around to know how much of an exposure that is, but it's a consideration. Not to mention squatters. This is a poor choice.
Paper money is the best option so far. It's easy to store and I'm already familiar with the process of storing it (putting it in the bank), I'm already familiar with my tax liabilities with regards to receiving cash and the US Dollar is pretty stable. Assuming I do nothing but let it sit I can at least earn some marginal interest, even if I'm losing out a bit against inflation.
sebster wrote: Oh, it's those guys? They're pro-gold standard, and therefore complete nutters with nothing useful to say about anything. There's nothing to see here people.
Boom! Called it. Boom!. Oh yeah! Boom! Didn't watch the video! Boom! Never ever heard of them! Boom! Oh Yeah! Boom! Never trust an old fashioned hat! Boom! Take that neckbeards! Boom! Where's your Ron Paul now? Boom!
So your prefer your currency backed by what.? fantasy ? A set of numbers made up because they look good?
How about a national storehouse of Ron Paul's pubes?
1. Gold is a PITA and costs money to store. It is declining in value recently so the £10,000 will probably be less by the time I can convert it to actual cash.
3. £10,000 of property is not very much in the UK, and has the problems and costs of converting it to cash. For example a piece of land worth £10,000 will cost you probably around £500 to sell.
Whereas cash in the bank is as safe as British society (up to the value of £85,000), can accumulate a little bit of interest, and be easily spent.
I think the gold bugs have lost sight of problems associated with gold and the advantages of fiat currency. It didn't become the world standard because of being a massively clever con trick.
Da Boss wrote: Honestly makes me wish our paramilitary organisations would do something useful for a change.
Having lived through it I am going to respectfully disagree
He said British and paramilitary. Thats funny. What do you guys have, claymores? (or at least until the Scots secede and take the Claymores too).
Here's a treat, if you want to see what life is like without financial institutions, look to the middle ages, or your lesser advanced countries in the Middle East.
loki old fart wrote: Every body should have done as Iceland did, told the banks to sort it out themselves.
Iceland made the right choice given their specific circumstances. But their specific circumstances involved large debts that were almost entirely offshore, and similarly large amounts of deposits by non-nationals in government owned banks. They were able to walk away from those merchant banks without tanking their own retail banking or housing sector. Iceland made the right choice given their circumstances, and good luck to them.
For the US, UK and others that had a much more complex problem, it's false to argue they should have just done the same as Iceland. The consequences would have been vastly different.
The consequences of what they did and didn't do are still with us. They did put the financial heath of the country at risk with debt.
The austerity measures leading to under fed children, people needing to visit food banks. The rate of evictions and suicides up.
They didn't prosecute the bankers for fraud, They didn't legislate to make it impossible too do this again.
As a competitor, I'm all for you crushing your domestic banks. Less comeptition. Hear hear!
loki old fart wrote: The consequences of what they did and didn't do are still with us.
Of course there were consequences from the chosen course of action. What I said was that the consequences of choosing not to bail out the banks would have been vastly different (ie catastrophically severe) compared to Iceland.
The austerity measures leading to under fed children, people needing to visit food banks. The rate of evictions and suicides up.
Austerity is straight up terrible policy. I had a thread running for a while here on dakka going through each part of the collapse of the academic foundations for austerity.
But the bail out and austerity are not related. Choosing one doesn't mean you also have to do the other.
They didn't prosecute the bankers for fraud, They didn't legislate to make it impossible too do this again.
Both of which should have happened, but in neither case was the bail out the reason they weren't enacted.
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Chongara wrote: Well, the logo has that that awful white-on-red color scheme, with some old fashioned nobody under 80 has any right associating with and the group is called the "Renegade Economist" .
Oh, it's those guys? They're pro-gold standard, and therefore complete nutters with nothing useful to say about anything. There's nothing to see here people.
So your prefer your currency backed by what.? fantasy ? A set of numbers made up because they look good?
So you want to go back to the gold standard? As Scotty would say "how quaint." Gold is just a commodity like anything else.
What gives Gold an intrinsic value? Answer, nothing more than what gives paper "fiat" money intrinsic value. Just trust that it has value.
If a real catasrophic crisis came people would value canned goods, firearms, and ammo way more than gold. Therefore, we should back all our currency with canned goods.
Easy E wrote: What gives Gold an intrinsic value? Answer, nothing more than what gives paper "fiat" money intrinsic value. Just trust that it has value.
If a real catasrophic crisis came people would value canned goods, firearms, and ammo way more than gold. Therefore, we should back all our currency with canned goods.
Hmmm... I like the idea of paying for groceries with bullets. I've got a lot of shotgun shells just not being used.
Easy E wrote: What gives Gold an intrinsic value? Answer, nothing more than what gives paper "fiat" money intrinsic value. Just trust that it has value.
If a real catasrophic crisis came people would value canned goods, firearms, and ammo way more than gold. Therefore, we should back all our currency with canned goods.
Easy E wrote: What gives Gold an intrinsic value? Answer, nothing more than what gives paper "fiat" money intrinsic value. Just trust that it has value.
If a real catasrophic crisis came people would value canned goods, firearms, and ammo way more than gold. Therefore, we should back all our currency with canned goods.
Easy E wrote: What gives Gold an intrinsic value? Answer, nothing more than what gives paper "fiat" money intrinsic value. Just trust that it has value.
If a real catasrophic crisis came people would value canned goods, firearms, and ammo way more than gold. Therefore, we should back all our currency with canned goods.
Just a caution. I'm not an economist, but making currency based on something that's actually useful could have interesting effects.
I am reminded of a setting of a RPG where iron was used as currency (since it could actually be used to forge something, unlike gold which really is useless until you're a society advanced enough to produce low resistance electrical connectors.). The necessity of making basic equipment cheap enough to be affordable resulted in a sword being worth more when melted down and reforged into iron pieces than it actually could be sold for as a sword.
Obviously the above example is absurd and nothing like that would actually happen in everyday life, but the problem with using useful material as currency is that...well...people need to use it. And usually once something has been used it wouldn't be much good as currency anymore.
In an apocalypse survival situation you want stuff you can use, but in any other situation I'd rather have whatever purchasing mechanism has the strongest guarantee of value behind it.
loki old fart wrote: So your prefer your currency backed by what.? fantasy ? A set of numbers made up because they look good?
Fiat currency is 'backed' by the goods and services that individuals need and want. Involving some other resource doesn't actually achieve anything.
loki old fart wrote: Exactly, your currency has value, because I think it has. My currency has value, because you think it has. Value based on confidence. But which would you prefer. 10,000 in paper money? 10,000 in gold or silver? !0,000 in land or property?
In an economy that is functioning, the first is the optimum storage for money kept for short term consumption spending (the latter is a good option for long term investment, while gold is a good option if you need to buy your wife something nice for your anniversary but otherwise useless).
In an economy that is functioning so poorly that paper money is no longer a good option for short term consumption, then the other two options will be equally useless.
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dementedwombat wrote: Obviously the above example is absurd and nothing like that would actually happen in everyday life, but the problem with using useful material as currency is that...well...people need to use it. And usually once something has been used it wouldn't be much good as currency anymore.
Actually, that exact example did happen. The need for gold as a backing to currency drew vast amounts of gold in to the reserve banks, pumping up the price and actually making it too expensive for use.
And contrary to the modern myth, gold doesn't produce a stable currency - has anyone been watching the price of gold? Sure over the very long term you get only a slow appreciation, but in the short term you get price spikes and long periods of price declines, which would amount to economic disaster.
Am I the only guy here who thinks money isn't going away any time soon?
Besides, gold as a currency is useless, you can't store it digitally, goodbye internet banking and well, modern world everything. Gold currency would slow down every economy to a crawl.
When you have Sovereign Citizens, Doomsday Preppers, BNP Supporters, people that voted UKIP, fans of Geert Wilders, and people who think Silvio Berlusconi is a good man, you're not allowed to be surprised at people wanting gold as currency.
MrDwhitey wrote: When you have Sovereign Citizens, Doomsday Preppers, BNP Supporters, people that voted UKIP, fans of Geert Wilders, and people who think Silvio Berlusconi is a good man, you're not allowed to be surprised at people wanting gold as currency.
No, but I am allowed to think it's dumb and make fun of it.
Besides, nothing in this world as an intrinsic(sp?) value, all value is bestowed by us. We can use anything as currency, that doesn't make it a good idea.
Kilkrazy wrote: I would take the £10,000 paper cash and put it in the bank.
So when all that overprinting of currency causes a crash in the near future, you will be happy that your 10000 will buy you a few slices of bread.
Ok. LET'S DO THIS! I will give you $50.00 USD Today. On the stipulation that in 10 years, you will give me $25,000 USD. If your belief here is true this will work out to be a pretty good deal for you as in the end money I give you ($50.00 USD) you can use today to buy a nice dinner, a box minis or a moderately priced new video game... or whatever else strikes your fancy. The $25,000 USD you will give me in 10 years will buy me at most a loaf of whole wheat wonder bread (which I don't even like). A pretty good trade for you, from what I can see.
Come on man. Give me your contact info. LETS WRITE THIS THING UP.
Kilkrazy wrote: I would take the £10,000 paper cash and put it in the bank.
So when all that overprinting of currency causes a crash in the near future, you will be happy that your 10000 will buy you a few slices of bread.
Ok. LET'S DO THIS! I will give you $50.00 USD Today. On the stipulation that in 10 years, you will give me $25,000 USD. If your belief here is true this will work out to be a pretty good deal for you as in the end money I give you ($50.00 USD) you can use today to buy a nice dinner, a box minis or a moderately priced new video game... or whatever else strikes your fancy. The $25,000 USD you will give me in 10 years will buy me at most a loaf of whole wheat wonder bread (which I don't even like). A pretty good trade for you, from what I can see.
Come on man. Give me your contact info. LETS WRITE THIS THING UP.
EDIT:
If you have the moral stomach for it, there are plenty of better schemes to take advantage of Doomsday believers. BEHOLD!
Just swear you are an atheist, and that you will totally check in on pets if all Christians simultaneously vanish. That's easier money than selling overpriced fifes to Reasonabilists the day before Zorp returns and melts our faces off.
Easy E wrote: What gives Gold an intrinsic value? Answer, nothing more than what gives paper "fiat" money intrinsic value. Just trust that it has value.
If a real catasrophic crisis came people would value canned goods, firearms, and ammo way more than gold. Therefore, we should back all our currency with canned goods.
In an economy that is functioning, the first is the optimum storage for money kept for short term consumption spending (the latter is a good option for long term investment, while gold is a good option if you need to buy your wife something nice for your anniversary but otherwise useless).
And thats the point, it;s ok In an economy that is functioning properly. It's worthless in a dysfunctional economy.
In an economy that is functioning so poorly that paper money is no longer a good option for short term consumption, then the other two options will be equally useless.
Calling BS on that, Gold maintains it's value in a functional or dysfunctional economy.
And contrary to the modern myth, gold doesn't produce a stable currency - has anyone been watching the price of gold? Sure over the very long term you get only a slow appreciation, but in the short term you get price spikes and long periods of price declines, which would amount to economic disaster.
See that graph, where it say's London fix? They've been manipulating the price of gold, to boost investment in the stock market.
When the system crashes, the brakes will come off. Think about it, why so many adverts for buying gold on tv. Why leaflets through the door, saying sell us your gold. Why bother doing that if it's going down in value.
Soladrin wrote: Am I the only guy here who thinks money isn't going away any time soon?
Besides, gold as a currency is useless, you can't store it digitally, goodbye internet banking and well, modern world everything. Gold currency would slow down every economy to a crawl.
False. Gold backed currency would work exactly the same.
Just swear you are an atheist, and that you will totally check in on pets if all Christians simultaneously vanish. That's easier money than selling overpriced fifes to Reasonabilists the day before Zorp returns and melts our faces off.
Thanks for making me laugh!
This is the most unashamed scam I've ever seen - it's glorious.
So is gold. The inherent material value of gold is about the same as the inherent value of paper money (use it for toilet paper, burn it for heat, etc). The entire "value" of gold is the result of having a functioning economy that has agreed to use gold as a medium of exchange.
Calling BS on that, Gold maintains it's value in a functional or dysfunctional economy.
Just as long as you are content with your gold "maintaining" a very small amount of value based on its use in jewelry and electrical components.
Think about it, why so many adverts for buying gold on tv. Why leaflets through the door, saying sell us your gold. Why bother doing that if it's going down in value.
Because speculators want to take advantage of people who need quick cash. I seriously doubt they're offering even close to fair market value for that gold, and if it happens to increase in price then they just get even more money. You might as well ask why people send out email spam if there isn't really any wealthy king who just needs a little help getting their money out of the country.
False. Gold backed currency would work exactly the same.
Ok, so now we're talking about a currency "backed" by an arbitrary promise of value, not actually using the gold for currency? How exactly is that supposed to be different from the current system?
MrDwhitey wrote: We're basically carrying our money in wheelbarrows at this point.
Then the jewish/sociallist/capitalist/neo-liberal/hipster-conservative/lizardmen banking cabal has done it's job.
I don't believe this is the case otherwise we'd be having a servant carry our money in a bicycle, whilst greeting passers by with "Shalom comrade , down with welfare, have you seen my new bike it's the best available , nice day for a sunbake!
MrDwhitey wrote: We're basically carrying our money in wheelbarrows at this point.
Then the jewish/sociallist/capitalist/neo-liberal/hipster-conservative/lizardmen banking cabal has done it's job.
I don't believe this is the case otherwise we'd be having a servant carry our money in a bicycle, whilst greeting passers by with "Shalom comrade , down with welfare, have you seen my new bike it's the best available , nice day for a sunbake!
Fiat currency is backed not on simple trust, but on the expectation that I can use it to purchase goods and services. That is, I'll happily take it as payment for a day's work because I expect I will be able to then use it in exchange for food, power bills and everything else I have to pay for.
Gold backed currency is exactly the same, except in addition to be able to be traded for goods and services, it can also be swapped for a fixed amount of gold, which is a feature valuable to people who want gold. That would be the average person when they want a new piece of jewelry (and given the US jewelry industry is about 70 billion, or half of 1% of the economy, we'll put that down "as most people but only very occassionally"), and also a minor part of the electronics industry.
In other words, you go from having a currency that works because people expect to be able to use it to purchase goods and services, to a currency that works because people expect to be able to use it to purchase goods and services, and also sometimes trade it at a fixed rate for some gold, or for a very small number of people to sometimes access some gold for electronics.
In order to get those last two bits
See that graph, where it say's London fix? They've been manipulating the price of gold, to boost investment in the stock market.
Ah, that's not how the fix works. Maybe you're getting confused by the word 'fix', or maybe you've watched a youtube video that lied to you, I don't know. But the word there 'fix' just means the settled price between the five major trading houses - it's their internal rate that they use to balance the variety of buy & sell offers they each hold.
The gold fluctuations you saw in the graph aren't explained away by half assed conspiracy theories. They represent the real fluctuations in demand and supply for gold over time. The post-GFC climb in gold price wasn't due to price fixing but due to panicked and stupid money flooding in to gold, and the collapse in gold price after that was due to that same panicked and stupid money realising that the world wasn't collapsing and all they were holding was a non-productive asset at a highly speculative price.
The idea that you want to tie your money supply to such an asset is simply absurd. A barbarous relic, if you like
When the system crashes, the brakes will come off. Think about it, why so many adverts for buying gold on tv. Why leaflets through the door, saying sell us your gold. Why bother doing that if it's going down in value.
Ummm, they're not looking to buy up your jewelry so they can hold on to it forever as an investment. I have no clue where you got that idea from. They're looking to buy up gold at a discount, to then on-sell at a premium in the current market... That's just retail. It's like asking why car dealers will buy your old car, if it's only going to depreciate.
Wait, are there seriously people who think that there is an economic collapse that would make paper money worthless but leave gold intact?
What kind of scenario are they thinking of?
In a zombie apocalypse, your gold would just weigh you down even more than paper money. If Yellowstone erupted and smoke blotted out the sun, freezing the US foodbelt, your gold would be worth less than an ear of corn. You can't eat gold. Maybe a solar flair destroys every piece of unshielded electronics, meaning we don't have printers or online bank records anymore - in that scenario, we're back in the Dark Ages, except this time no one wants to be a peasant. Kill or be killed. Eat or be eaten. All of society tears itself apart. Best case scenario is that, if your gold is worth something, the cannibals currently eating your face decide to take your gold with them.
Woaw, zombie apocalypse really? it just means that governments are printing more and more money to hide the real issues, and when the card house falls down all your savings are word Sh**!, it is just another bubble waiting to burst.
Jehan-reznor wrote: Woaw, zombie apocalypse really? it just means that governments are printing more and more money to hide the real issues, and when the card house falls down all your savings are word Sh**!, it is just another bubble waiting to burst.
Jehan-reznor wrote: Woaw, zombie apocalypse really? it just means that governments are printing more and more money to hide the real issues, and when the card house falls down all your savings are word Sh**!, it is just another bubble waiting to burst.
You need to go and read about Reserve Bank independence. The money printed by any reserve or central bank of any modern country is entirely unrelated to government's fiscal needs. Instead that bank looks to its own charter to keep inflation within a certain desirable band, and prints enough money to meet that band.
Jehan-reznor wrote: Woaw, zombie apocalypse really? it just means that governments are printing more and more money to hide the real issues, and when the card house falls down all your savings are word Sh**!, it is just another bubble waiting to burst.
mmm Zombie apacalypse. The best defesne is a good offense. Eat the Zombies.
The problem is the methodology used to create that number has changed dramatically over the past 30+ years and is now greatly understating the inflation rate here in the USA.
The main reason why these numbers are under reported is because so many of the government's debt obligations are determined by the CPI. By under reporting inflation, the are able to reduce their liability.
The real concern here is currency induced cost push inflation. That is the collapse scenario people on here have been discussing and that isn't really the result of money printing in the traditional sense.
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As for gold... It's transferable wealth. There are times to own it and times to not own it. Based on the simple idea of not following the herd, you should own it right now. Less than 3% of the general public's assets are in gold. During the bubble mania phases of the past, we've seen gold make up 40% of the public's net worth. Right now, real estate and stocks are both over 40% of the public's net worth at the same time. That is always a bad sign.
Right now, banks are on 20-1 leverage and the stock market is MORE frothy than it was at the last bubble peak. the Current forward S&P 500 P/E: 15.6x.. The Forward S&P 500 P/E on October 9, 2007 was15.2x.. When it gets this high, it has always resulted in a crash. This party wont last much longer and there will be no natural buyers when the entire system is on this much leverage. So we will likely have another crash pretty soon here. Real estate will likely get hit too because so much of bank assets are actually still in these mortgages.
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The most asinine thing I've read in this thread though was the comment that your money is safer in the bank than in your own home. Governments and financial institutions have been notorious for seizing assets inside of banks for generations. If you live in Georgia (USA) and have a bank account inactive for 1 year, it's immediately forfeited to the government. Other states are starting to pass similar laws because they are desperate for cash. Then when you start hearing about how the fed is going to institute exit fees on bond funds and NEGATIVE interest rates on deposits, how on earth can you think that wont be passed on to you? You have to be incredibly naive to think banks and the government would hesitate for one minute before giving you the D during a crisis.
dereksatkinson wrote: The problem is the methodology used to create that number has changed dramatically over the past 30+ years and is now greatly understating the inflation rate here in the USA.
Heh, I was just yesterday reading a really nice takedown on the shadowstats nonsense.
Thing is, shadowstats doesn't actually calculate inflation. All they do is state than in their opinion the change in govt calculation of CPI resulted in CPI being about 3% less than it would otherwise have been, and so they just add that number to the government figure at any point in time. Resulting in this nonsense;
Anyhow, some nerds at MIT set about tracking their own CPI measure, independantly gathering a billion prices and calculating price movements. They ended up with prices that are pretty much bang on government figures;
The main reason why these numbers are under reported is because so many of the government's debt obligations are determined by the CPI.
Actually, no. T-bills are sold on the open market, and the effective interest is based on financial market's expectation of future inflation (as well as future risk free real rate of return), not the printed government inflation figures.
Less than 3% of the general public's assets are in gold. During the bubble mania phases of the past, we've seen gold make up 40% of the public's net worth. Right now, real estate and stocks are both over 40% of the public's net worth at the same time. That is always a bad sign.
Umm, that's a result of changing economic realities, not a bubble. As society accumulates more productive assets, a greater proportion of the capital stock will be in productive assets.
Right now, banks are on 20-1 leverage and the stock market is MORE frothy than it was at the last bubble peak. the Current forward S&P 500 P/E: 15.6x.. The Forward S&P 500 P/E on October 9, 2007 was15.2x.. When it gets this high, it has always resulted in a crash. This party wont last much longer and there will be no natural buyers when the entire system is on this much leverage. So we will likely have another crash pretty soon here. Real estate will likely get hit too because so much of bank assets are actually still in these mortgages.
"The chicken bones spread in the pattern of the devil. Dark times are upon us! Repent children, repent!"
The most asinine thing I've read in this thread though was the comment that your money is safer in the bank than in your own home.
My comment?
Anyhow, money in the bank is non-productive. Even interest bearing it's just matching inflation at best. Keep transaction money in the bank, and make the rest actually productive.
Actually, no. T-bills are sold on the open market, and the effective interest is based on financial market's expectation of future inflation (as well as future risk free real rate of return), not the printed government inflation figures.
Who is talking about T-bills? I am talking about obligations. The government doesn't recognize a debt until they have borrowed the money already. It's actually quite alarming that you don't know the difference between debt and obligations.
sebster wrote: Thing is, shadowstats doesn't actually calculate inflation. All they do is state than in their opinion the change in govt calculation of CPI resulted in CPI being about 3% less than it would otherwise have been, and so they just add that number to the government figure at any point in time. Resulting in this nonsense;
Anyhow, some nerds at MIT set about tracking their own CPI measure, independantly gathering a billion prices and calculating price movements. They ended up with prices that are pretty much bang on government figures;
Shadowstats actually removes the hedonic adjustments from the CPI figures that weren't around back in the 1980s.
The MIT study actually still applied hedonic adjustments (productivity gains) so it should match the government data.
Actually, no. T-bills are sold on the open market, and the effective interest is based on financial market's expectation of future inflation (as well as future risk free real rate of return), not the printed government inflation figures.
Who is talking about T-bills? I am talking about obligations. The government doesn't recognize a debt until they have borrowed the money already. It's actually quite alarming that you don't know the difference between debt and obligations.
sebster wrote: Thing is, shadowstats doesn't actually calculate inflation. All they do is state than in their opinion the change in govt calculation of CPI resulted in CPI being about 3% less than it would otherwise have been, and so they just add that number to the government figure at any point in time. Resulting in this nonsense;
Anyhow, some nerds at MIT set about tracking their own CPI measure, independantly gathering a billion prices and calculating price movements. They ended up with prices that are pretty much bang on government figures;
Shadowstats actually removes the hedonic adjustments from the CPI figures that weren't around back in the 1980s.
The MIT study actually still applied hedonic adjustments (productivity gains) so it should match the government data.
I don't really have much to add that's constructive at this point, but as an EVE Online player, I can state with authority this thread has some high quality graph porn.
loki old fart wrote: This is what happens when you close American factories, and manufacture abroad. An aging population, and nobody working to pay into the system.
Pensions or federal obligations? If you are talking about the federal obligations, I think they were empty promises that were unrealistic from the get-go. Budgets are never balanced and nothing is ever really paid for until the very last moment. If the government ran on the same kind of GAAP accounting businesses use, it would be easily recognized as a farce. This will likely become a topic again by next fall.
As for state pensions.. The math is a bit ridiculous. The expectations for institutions that are that large to outperform the market and always make money is unrealistic. That is why states like Georgia are getting so creative with ways to pull in money. If you want someone to blame for losing jobs, I would start with those states which have been so aggressively going after businesses as a source of revenue. If the cost of doing business is low, there will be more jobs. Pretty simple concept. If it costs a business 3 times an employee's salary to employ an individual, there is something wrong with that picture.
It's unrealistic for American companies to manufacture in asia. And to sell that product to unemployed Americans, long term that is unsustainable. As long as more people pay in, than draw out, a reasonable pension should be expected.
@dementedwombat. I used to play eve online, then I got better.
Easy E wrote: What gives Gold an intrinsic value? Answer, nothing more than what gives paper "fiat" money intrinsic value. Just trust that it has value.
If a real catasrophic crisis came people would value canned goods, firearms, and ammo way more than gold. Therefore, we should back all our currency with canned goods.
Hmmm... I like the idea of paying for groceries with bullets. I've got a lot of shotgun shells just not being used.
Bottle caps. We should use bottle caps for money.
Also, the intrinsic value of gold is that it is rare and shiny.
First of all, there are always people being born. This results in steady, controlled inflation that no one government can manipulate. Secondly, it means everyone, no matter how poor, starts out with something: baby teeth. Its like welfare, except without the government. It regulates itself. Furthermore, we've been training children for it their whole lives. The idea of the Tooth Fairy was just introduced to get them ready to being paid in teeth.
On a final note, we is gonna stomp da universe flat and kill anyfink that fights back. we're da Orks, and was made ta fight and win.
First of all, there are always people being born. This results in steady, controlled inflation that no one government can manipulate. Secondly, it means everyone, no matter how poor, starts out with something: baby teeth. Its like welfare, except without the government. It regulates itself. Furthermore, we've been training children for it their whole lives. The idea of the Tooth Fairy was just introduced to get them ready to being paid in teeth.
dereksatkinson wrote: This time isn't any different... 23+ quarter rallies end and when they do, they end with a bang. It's not my fault you can't see how absurd this is.
So your claim is that sooner or later there'll be a downturn in the market, in which case your claim basically amounts to 'markets fluctuate', which can be met with a healthy 'duh'.
Alternatively, you might be claiming that you can say with some level of precision exactly what the peak of the market will be and when, in which case holy gak, you can make yourself a billionaire overnight. Just dump your savings in to shorts and put options the night before your prophecy, and the next day Warren Buffet will be coming to you for advice.
Who is talking about T-bills? I am talking about obligations.
Oh, so you're just getting at SS? In which case your belief that CPI is fudged to avoid future SS is total junk. SS is set by wage indexing, not the price of consumer goods.
And now we're on to that tired old hobby horse. To move past that nonsense quickly, just understand that merely listing all your future payments with no discounting for NPV, and no calculation of future revenue is fething stupid. It'd be like claiming Apple is bankrupt because they only have $150 billion sitting in the bank, and they'll have to pay their employees more than that in the next ten years.
sebster wrote:Shadowstats actually removes the hedonic adjustments from the CPI figures that weren't around back in the 1980s.
No, shadowstats doesn't do that. It just figured out what the adjustment was in 1980, and applied that exact same figure to every published figure since. If you're curious as to what the shadowstats figure of inflation is, just take the published CPI figure and add ~3%
Seriously, actually look at the graph, do you see the pattern?
Oh, so you're just getting at SS? In which case your belief that CPI is fudged to avoid future SS is total junk. SS is set by wage indexing, not the price of consumer goods.
As a means of adjusting dollar values: The CPI is often used to adjust consumers' income payments, (for example, Social Security); to adjust income eligibility levels for government assistance; and to automatically provide cost-of-living wage adjustments to millions of American workers. The CPI affects the income of about 80 million persons as a result of statutory action: 48.4 million Social Security beneficiaries, about 19.8 million food stamp recipients, and about 4.2 million military and federal Civil Service retirees and survivors. Changes in the CPI also affect the cost of lunches for 26.5 million children who eat lunch at school, while collective bargaining agreements that tie wages to the CPI cover over 2 million workers. Another example of how dollar values may be adjusted is the use of the CPI to adjust the federal income tax structure. These adjustments prevent inflation-induced increases in tax rates, an effect called "bracket creep".
Still want to argue? This is why I don't respond to every single comment you make. You aren't even reading.
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sebster wrote: No, shadowstats doesn't do that. It just figured out what the adjustment was in 1980, and applied that exact same figure to every published figure since. If you're curious as to what the shadowstats figure of inflation is, just take the published CPI figure and add ~3%
It has to do with reporting standards. The basically have taken out all the adjustments and made it an apples to apples comparison instead of apples to oranges.
The CPI chart on the home page reflects our estimate of inflation for today as if it were calculated the same way it was in 1990. The CPI on the Alternate Data Series tab here reflects the CPI as if it were calculated using the methodologies in place in 1980. In general terms, methodological shifts in government reporting have depressed reported inflation, moving the concept of the CPI away from being a measure of the cost of living needed to maintain a constant standard of living.
Yeah, this is the kind of thing you're going to get wrong when you rely on exciting financial journalism like zerohedge, instead of you know, actual fething substance.
You were talking about the "unfunded" future payments - ie payments owing to future retirees who are still working. The future payments to these people are based on wages growth measured by the AWI.
CPI only comes in to it when you're talking about people already receiving payments. ie a lower CPI will reduce the payments to current earners in future months.
And now, if you'll care to actually think about your theory for a second, realise that what you're suggesting is a conspiracy to cook economic numbers that goes across multiple departments of government, most of whom having nothing to gain, and this whole vast conspiracy is run just to reduce SS and other government payments... but fething why? Government, if it chooses, can simply vote to link payment increases to a lower measure of CPI, or even to CPI less some arbitrary amount, something that has actually been proposed in congress in the last couple of years.
It's just a silly, silly proposal.
This is why I don't respond to every single comment you make. You aren't even reading.
No, you don't respond because you simply don't have answers to two of the points I made;
1) That you think your chartist nonsense gives you some unique insight in to the future market peaks and troughs.
2) That you got conned in to that old scare tactic of adding up all the expected future payments government will make, without taking in to account all the future revenue it will earn.
It has to do with reporting standards. The basically have taken out all the adjustments and made it an apples to apples comparison instead of apples to oranges.
No, shadowstats is doing nothing of the sort. No matter what they type on their website, their actual published data very easy to deconstruct. All they did was look at the difference in CPI when the adjustment was made, and then just add that exact number to every published CPI figure.
Here is the shadowstats huckster himself;
"I’m not going back and recalculating the CPI. All I’m doing is going back to the government’s estimates of what the effect would be and using that as an ad factor to the reported statistics."
http://econbrowser.com/archives/2008/10/shadowstats_res
Now go and look at the graph. Do you see how the graph exactly matches the actual reported inflation, plus a fixed variable. That's because that's all shadowstats is.
Yeah, this is the kind of thing you're going to get wrong when you rely on exciting financial journalism like zerohedge, instead of you know, actual fething substance.
bls.gov isn't zerohedge. You are arguing for the sake of arguing. The government website uses SS as an example for god's sake.
Again.. Straight from the government website..
As a means of adjusting dollar values: The CPI is often used to adjust consumers' income payments, (for example, Social Security); to adjust income eligibility levels for government assistance; and to automatically provide cost-of-living wage adjustments to millions of American workers. The CPI affects the income of about 80 million persons as a result of statutory action: 48.4 million Social Security beneficiaries, about 19.8 million food stamp recipients, and about 4.2 million military and federal Civil Service retirees and survivors. Changes in the CPI also affect the cost of lunches for 26.5 million children who eat lunch at school, while collective bargaining agreements that tie wages to the CPI cover over 2 million workers. Another example of how dollar values may be adjusted is the use of the CPI to adjust the federal income tax structure. These adjustments prevent inflation-induced increases in tax rates, an effect called "bracket creep".
If you honestly don't think current wages do not impact the calculations used for future payments, I don't know where to begin. The best way to lower the NPV of a cash flow is to low the initial payment as much as possible. That's the basic concept of time value of money. A dollar today is worth more than a dollar tomorrow.
Calling my opinion "silly" doesn't make it less valid. Understating the CPI does lower the NPV of government obligations. It's not even debatable.
If we can't get past something this basic, i'll just have to admit defeat because the angles you are trying to argue are not rational. I mean this is REALLY basic. No economist would argue what you are trying to say.
dereksatkinson wrote: bls.gov isn't zerohedge. You are arguing for the sake of arguing. The government website uses SS as an example for god's sake.
Again.. Straight from the government website..
And now you're deliberately misreading me just so you don't have to admit you got something wrong. Yes, you linked to a BLS site, when you were trying to make your argument about CPI and SS. But my comment on zerohedge is on all the commentary and editorial you bring to here, which is almost entirely nonsense.
And just repeating that snippet of information you didn't properly understand the first time is just wasting your time and mine. I'll repeat how it works again - when you make payments in to SS, they are grown based wage indexing - ie as wages grow so does the final value of your benefit. Then once you start receiving payments those payments increase by CPI. The future liability you were talking about is almost entirely people still working in the system - ie the government liability will grow almost entirely through wage increases.
If you honestly don't think current wages do not impact the calculations used for future payments, I don't know where to begin.
What? Discounting for NPV was first brought in to this thread when I mentioned it to you, because you posted that nonsense that totaled future expected payments with no discounting. Be honest, did you run off and look up NPV after I mentioned it, and are now pretending you knew about it all along?
If we can't get past something this basic, i'll just have to admit defeat because the angles you are trying to argue are not rational. I mean this is REALLY basic. No economist would argue what you are trying to say.
Find me an economist on Earth that is trying to claim that government deliberately understates inflation so that it can reduce the real dollar cost of future payments. Just one will do.
6 days ago we were at all time highs... Today.. the Russell 2000 just went negative on the year. That's approximately a 6% drop and most of it was over the past 3 sessions.
What caused the sell off? The 2nd largest Portuguese bank, Espirito Santo, missed a bond payment 2 days ago and then halted trading today. The Dow 30 equivalent for Portugal is now down 22% off it's highs. There is already plenty of talk about the potential for contagion. I'm not willing to bet on it but it does show exactly how leveraged, unstable and interconnected these markets are if a single bank missing a bond payment can cause this much havoc even if it is temporary.
IMHO.. this isn't a "herd turning" moment but if we get a couple follow on events from this, it could be that the Holy Ghost (Espirito Santo) just made the market give up the ghost.
dereksatkinson wrote: 6 days ago we were at all time highs... Today.. the Russell 2000 just went negative on the year. That's approximately a 6% drop and most of it was over the past 3 sessions.
Oh feth me, now you're posting a move in a small cap index as if it were news. It happens - the market fluctuates, especially small cap stocks.
What caused the sell off? The 2nd largest Portuguese bank, Espirito Santo, missed a bond payment 2 days ago and then halted trading today.
Yeah, the drop in small cap stocks in NY is clearly due to a wobbly bank in Portugal. That isn't speculative nonsense at all!
Please go and read actually good financial advice. Go read Ritholz or Housel. They'll actually be honest with you, and won't spend time trying to tell you exciting stories that end with you thinking you know more than you really do. One big lesson they will both tell you is that sometimes the market drops - there's no clear reason, it'll just happen. Around once a year you'll get a reasonable drop, and around once a decade you'll get a big drop, and anyone who tells you they know why is telling you a story for their own benefit.
dereksatkinson wrote: 6 days ago we were at all time highs... Today.. the Russell 2000 just went negative on the year. That's approximately a 6% drop and most of it was over the past 3 sessions.
Oh feth me, now you're posting a move in a small cap index as if it were news. It happens - the market fluctuates, especially small cap stocks.
What caused the sell off? The 2nd largest Portuguese bank, Espirito Santo, missed a bond payment 2 days ago and then halted trading today.
Yeah, the drop in small cap stocks in NY is clearly due to a wobbly bank in Portugal. That isn't speculative nonsense at all!
Please go and read actually good financial advice. Go read Ritholz or Housel. They'll actually be honest with you, and won't spend time trying to tell you exciting stories that end with you thinking you know more than you really do. One big lesson they will both tell you is that sometimes the market drops - there's no clear reason, it'll just happen. Around once a year you'll get a reasonable drop, and around once a decade you'll get a big drop, and anyone who tells you they know why is telling you a story for their own benefit.
Global stock markets hit by Portuguese bank concerns
Shares in Banco Espirito Santo were suspended after falling 17% following concerns about accounting irregularities at its parent group.
As a result, the Lisbon stock exchange fell more than 4%, Madrid's IBEX was down 2.7%, while the Paris Cac 40 and Frankfurt's Dax were both 1.8% lower.
Wall Street also opened sharply lower, with the Dow Jones falling 150 points.
This took the index well below 17,000, the level breached for the first time earlier this month.
Media reports highlighting concerns about certain financial practices at the Espirito Santo group surfaced at the end of last year.
Portugal's central bank then ordered an audit into the group's accounts, which uncovered "serious" accounting irregularities.
What I find most amusing about this thread is how Derek talks about impending doom in the economy and stock markets...yet over in the GW share price thread he's deriding everyone who discusses GW's decline and potential failure as doom mongering haters foaming at the mouth.
Shadow Captain Edithae wrote: What I find most amusing about this thread is how Derek talks about impending doom in the economy and stock markets...yet over in the GW share price thread he's deriding everyone who discusses GW's decline and potential failure as doom mongering haters foaming at the mouth.
It's a complete role reversal.
I'm bearish on GW's stock price. Just for a completely different reason that what's being trotted out there.
Automatically Appended Next Post: Also.. When I find these kinds of stories running, I can't help but see a bubble.
Global stock markets hit by Portuguese bank concerns
Indeed. It's like a $6 billion market cap company (which is actually fairly small in the grand scheme of things) that is causing ripples throughout economies because of leverage and interconnected markets. Portugal makes up something like 1.6% of the Eurozone banking assets so the chances of REAL contagion coming from this is minimal. However, it is big enough to where it can cause margin calls and a pretty good drumming for this market if it isn't handled properly.
Only A New Gold Standard Will Save The U.S. Dollar - Steve Forbes
A weak U.S. dollar is a threat to the global economy and the only way to stop the greenback’s decline is to reintroduce a gold standard, said media tycoon, Steve Forbes.
Forbes, the editor and chief of Forbes Media, was one of the keynote speakers at the annual Freedomfest conference in Las Vegas, an annual convention that looks to gather free minds for open discussions on politics and the economy.
In an interview with Kitco News’ Daniela Cambone, Forbes talked about gold’s role it the U.S. economy, which is also highlighted in his latest book MONEY: How The Destruction Of The Dollar Threatens The Global Economy And What We Can Do About It. He said to stop the decline in the U.S. dollar it only makes sense to link it to gold.
Forbes said different currency valuation methods have been tried for “more than 4,000 year,” and experience shows that having a gold standard is the way to go. He added a gold standard “done right” provides stability and value when it comes to money supply.
Well.. the gold standard basically handcuffs central planners so politicians wont go for it. I don't believe we will see a gold standard but I do suspect gold is moving towards the monetary system as a whole. China and Russia are definitely taking action on that front as a way to get away from the US dollar for example. So maybe we see something on an international front but I doubt it domestically.
Instead.. I think that we likely see a "clean slate" type of moment that involves a war of some kind. Winner gets to keep printing and the loser defaults on their debts. Historically, that's how it always ends up. Normally, the debts aren't this global and this large pre-war though.
At the heart of the gold conspiracy theories is the idea that, "Gold is prettier than paper, so it'll survive the collapse of society that Charles Manson warned me about".
And if you're talking about the industrial uses of gold, realize that the price of gold would plummet if people were only using it for industrial uses. Your investment would still flop in the apocalypse (that's the funny thing about apocalypses).
Why don't crazy people just invest in ammo, cigarettes, and toilet paper instead? And by invest I mean become hoarders. It seems like a lot less effort for a guaranteed profit once Obamalluminati plunges the world into a war over whether the reptilians or the jews own the chemtrails.
LoneLictor wrote: At the heart of the gold conspiracy theories is the idea that, "Gold is prettier than paper, so it'll survive the collapse of society that Charles Manson warned me about".
And if you're talking about the industrial uses of gold, realize that the price of gold would plummet if people were only using it for industrial uses. Your investment would still flop in the apocalypse (that's the funny thing about apocalypses).
Why don't crazy people just invest in ammo, cigarettes, and toilet paper instead? And by invest I mean become hoarders. It seems like a lot less effort for a guaranteed profit once Obamalluminati plunges the world into a war over whether the reptilians or the jews own the chemtrails.
wow.. I've never heard that argument before. Maybe you should start a newsletter.
If gold is so worthless, why do central banks still hold it? Gold has been used as a currency for 5000+ years because of it's rarity and lack of industrial uses. It's not a "it's pretty" argument. It's a hedge against central banks being corrupt and foolish. Fiat currencies really don't last very long historically so there is no real reason to expect them to suddenly do the right thing now.
Espírito Santo Unit Rioforte to File for Creditor Protection
So i guess that capital they raised wasn't enough to cover their margin call. Now we do have to worry about contagion. They were supposed have a EUR 847 million payment to Portugal Telecom tomorrow (or today) and it looks like they wont be making that payment because now PT is down about 10% on the uncertainty. If it does indeed default, it would likely cause payments that PT is supposed to make to be defaulted on if they don't have enough cash on hand (remember these companies are all leveraged) and it would spread on and on to other companies.
Oh.. and it's impacting the US credit markets this morning and US stocks are getting hit because Yellen is basically telling everyone that the general public is reaching for yield. Such sure footing this financial system is on...
BIS chief warns debt mountain puts global economy into worse state than before 2008 crash
The global economy is more vulnerable than it was just before Lehman Brothers collapsed says the Bank of International Settlements (BIS), the international finance watchdog, citing even higher debt ratios and emerging market involvement.
Jaime Caruana, head of the BIS, warned that nobody invested in stocks seems prepared for the idea that at some point central banks will begin raising interest rates again, in an interview with the DailyTelegraph.
As most major central banks including the UK, US and Japan are holding rates at around zero percent, banks get accustomed to ‘easy money’ and ignore the risk of monetary tightening. That is boosting stocks, because there is no point in investors keeping their money in savings accounts at such low returns.
“Markets seem to be considering only a very narrow spectrum of potential outcomes. They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give,” Caruana said.
As most major central banks including the Bank of England and the US Federal Reserve are holding rates at around zero percent investors leave savings accounts due to insignificant returns. That boosts a looming "irrational" stock bubble Caruana said, without specifying when the bubble will burst.
Since 2008 the emerging markets have gained around $2 trillion in foreign currency debt, becoming a way bigger player than they were during the East Asia crisis of the late 1990s.
“The ramifications would be particularly serious if China, home to an outsize financial boom, were to falter," the BIS said.
IMF: Eurozone weak, risks falling into deflation
The single currency bloc can fall into deflation, as the recovery across the region is weak and inflation remains too low, the IMF warned on Monday. It said the member states should be ready for quantitative easing, if rising prices remain subdued. "The recovery is weak and uneven. Inflation has been too low for too long, financial markets are still fragmented, and structural gaps persist: these hinder rebalancing and substantial reductions in debt and unemployment," said the report.
BIS chief fears fresh Lehman from worldwide debt surge
Jaime Caruana says investors are ignoring prospect of higher interest rates in the hunt for returns
Overall, it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally,” it said.
Mr Caruana declined to be drawn on when the bubble will burst. "As Keynes said, markets can stay irrational longer than you can stay solvent,” he said.
The BIS says prolonged monetary stimulus in the US, Europe, and Japan has led to a leakage of liquidity, contaminating the rest of the world. The rising powers of Asia are no longer able to act as a firebreak – as they did after the Lehman crash –and may themselves now be a source of risk.
Microsoft just announced 18k layoffs. Since the economy is booming and all..
Housing starts and permits came out REALLY soft.. Starts missed expectations the most since Jan 07. Housing permits have biggest 2 month plunge since lehman brothers blew up.
So tech and housing certainly wont be keeping us from going into a recession...
Kilkrazy wrote: As far as the UK goes the financial sector is as big as it ever was, despite four years of the government supposedly wanting to rebalance the economy away from finance.
Of course the reason why the UK still has such a large financial sector is that out of the four major banking groups, three effectively went bust but were bailed out by the UK government (in Barclays case by middle eastern sovereign wealth funds.)
If the government had adopted the strategy suggested by Joseph Stigler, which was to tell the banks to sort out their own problems, the finance section would have shrunk a lot.
In effect the risk taking of finance was transferred to the citizenry.
But we don't get any of the payoffs for this? Where are our interest payments for lending them this money?
dereksatkinson wrote: Microsoft just announced 18k layoffs. Since the economy is booming and all..
Or it could be they were a bloated company with too many layers of management that had displayed a lack of ability to respond to market forces for several years now finally shedding dead weight
It's not like layoffs are impossible even in good times. Intel cut tens of thousands of jobs in the mid 2000's before the 2008 crash, and it had nothing to do with the overall economic picture, they'd just mismanaged themselves and had over-promoted too many people than was necessary and had to retire product lines that were no longer relevant in the market.
Wall Street also opened sharply lower, with the Dow Jones falling 150 points.
You're just putting in colour the junk I already explained was junk. People see a piece of bad news in one place, and a piece of bad news somewhere else, and conclude that one caused the other. It's crap reporting, the kind of stupid nonsense that fills up loads of financial reporting.
Understand this, and realise prices will wobble constantly for little or no reason and that's okay because the long term trend is always up... and then you realise why long term investment in a broad range of assets is highly effective.
Alternatively you can read the breathless nonsense talking about every minor wobble as if it were a major new trend, and either hide away from the market or worse, think you can ride those wobbles and trade your way to success.
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loki old fart wrote: A weak U.S. dollar is a threat to the global economy and the only way to stop the greenback’s decline is to reintroduce a gold standard, said media tycoon, Steve Forbes.
The most incredible thing is that the reasons gold is a really poor means of controlling money aren't even that complex. An eight year old with reasonable concentration could understand it given an hour or so.
The power of reasonably intelligent people to apply their intellect to justifying stupid things is quite amazing.
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dereksatkinson wrote: Well.. the gold standard basically handcuffs central planners so politicians wont go for it.
Yeah. What you're missing is that it is bad to handcuff central banks, because monetary policy as a means to offset business cycles is a good thing.
China and Russia are definitely taking action on that front as a way to get away from the US dollar for example.
No, China and Russia are moving away from the dollar (sort of, it's a lot more complex than your summary above) because the US no longer dominates the world economy as it once did. People have written all sorts of stupid nonsense about that, but the basic reality is that there was no reason to think that a country with 4% of the world population would continue to have more than 30% of the world's economic activity.
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dereksatkinson wrote: If gold is so worthless, why do central banks still hold it? Gold has been used as a currency for 5000+ years because of it's rarity and lack of industrial uses. It's not a "it's pretty" argument. It's a hedge against central banks being corrupt and foolish.
And here it is. All of the crap and silliness, really all comes back to a belief that central banks are somehow destined to be corrupt and foolish.
It's a notion I suspect you won't ever be reasoned out of. Which is why trying to reason you out of the rest of this, my posting of graphs showing your great concern over inflation is completely baseless, my showing you that shadowstats is junk, and that independent inflation measures closely track with official figures... it's all pointless because you just... believe.
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loki old fart wrote: BIS chief warns debt mountain puts global economy into worse state than before 2008 crash
The global economy is more vulnerable than it was just before Lehman Brothers collapsed says the Bank of International Settlements (BIS), the international finance watchdog, citing even higher debt ratios and emerging market involvement
BIS rolled in to 2009 warning everyone that QE was terrible because there'll be inflation. What was needed was tighter money and higher yields. Then when that turned out to be stupid they didn't accept they were completely wrong, they just changed the reason they wanted higher yields to 'bubbles! bubbles I tell ya!'
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dereksatkinson wrote: Microsoft just announced 18k layoffs. Since the economy is booming and all..
fething what? A single tech company restructures, and you're using that to make claims about macro level economic activity? Now you're just being silly.
dereksatkinson wrote: Microsoft just announced 18k layoffs. Since the economy is booming and all..
Or it could be they were a bloated company with too many layers of management that had displayed a lack of ability to respond to market forces for several years now finally shedding dead weight
It's not like layoffs are impossible even in good times. Intel cut tens of thousands of jobs in the mid 2000's before the 2008 crash, and it had nothing to do with the overall economic picture, they'd just mismanaged themselves and had over-promoted too many people than was necessary and had to retire product lines that were no longer relevant in the market.
So we are in good times? This is prosperity?
Consensus real GDP has already been marked down to 1.7%—the lowest rate of expansion since the financial crisis.
I still think it's pretty obvious we are in a recession here. I don't see why that is so controversial.
SFO investigates price rigging in foreign exchange market The Serious Fraud Office (SFO) has launched a criminal investigation into allegations of price rigging in the £3tn-a-day foreign exchange market.
The probe will look into allegations of "fraudulent conduct", the director of the SFO said in a statement.
Around 15 international agencies are investigating allegations of collusion and price manipulation.
It is alleged that traders used online chatrooms to plan the fixing of benchmark prices.
The Financial Conduct Authority (FCA) said in October it had joined other regulators around the world in scrutinising firms over the potential manipulation of the foreign exchange market.
Several investment banks, including Barclays and HSBC have already suspended currency traders due to the investigation by the FCA.
And in March this year the Bank of England suspended one member of staff over the probe.
'Bad' markets
At the time the head of the Financial Conduct Authority, Martin Wheatley, said that currency manipulation was "every bit as bad" as the Libor scandal, where banks including Barclays, Royal Bank of Scotland and UBS paid fines totalling $6bn relating to Libor fixing.
For the criminal probe the SFO will work in co-operation with the FCA and the US Department of Justice, which announced its own criminal investigation last October.
Earlier this year US prosecutors flew to London to question individuals over allegations of market manipulation.
SFO investigates price rigging in foreign exchange market
Business as usual.
*sigh* so, so true. At this point, I'm honestly not sure how you deal with these sorts of entities. Foreign exchange, private equity markets, municipal bonds... pretty much just glorified "Nigerian Prince" type scammers at this point.
dereksatkinson wrote: Microsoft just announced 18k layoffs. Since the economy is booming and all..
Or it could be they were a bloated company with too many layers of management that had displayed a lack of ability to respond to market forces for several years now finally shedding dead weight
It's not like layoffs are impossible even in good times. Intel cut tens of thousands of jobs in the mid 2000's before the 2008 crash, and it had nothing to do with the overall economic picture, they'd just mismanaged themselves and had over-promoted too many people than was necessary and had to retire product lines that were no longer relevant in the market.
So we are in good times? This is prosperity?
Consensus real GDP has already been marked down to 1.7%—the lowest rate of expansion since the financial crisis.
I still think it's pretty obvious we are in a recession here. I don't see why that is so controversial.
I didn't say we were in great economic times, my point was that trying to use Microsoft's layoffs as a macroeconomic indicator was silly as there are lots of reasons unrelated to the larger macroeconomic situation for their layoffs.
Vaktathi wrote: I didn't say we were in great economic times, my point was that trying to use Microsoft's layoffs as a macroeconomic indicator was silly as there are lots of reasons unrelated to the larger macroeconomic situation for their layoffs.
I never said it was a macro-economic indicator, it was tongue and cheek sarcasm. There was no implication of cause and effect. It's just a sign of the times. "Since the economy is booming and all.." was a reference to the narrative that the weather was the cause for the light economic numbers and Q2 should have a substantial bounce in GDP where we will reach escape velocity to the moon. Not exactly working out that way based on the data.
That being said, the macro environment does matter for businesses and most certain does impact if and when layoffs occur. During an expansion, you don't see "efficiency" moves like the one MSFT just did.
I agree there are problems with MSFT. However, MSFT is up around 19% on the year as I'm writing this. Could that be another sign of the herd not paying attention to fundamentals?
At the time the head of the Financial Conduct Authority, Martin Wheatley, said that currency manipulation was "every bit as bad" as the Libor scandal, where banks including Barclays, Royal Bank of Scotland and UBS paid fines totalling $6bn relating to Libor fixing.
For the criminal probe the SFO will work in co-operation with the FCA and the US Department of Justice, which announced its own criminal investigation last October.
Earlier this year US prosecutors flew to London to question individuals over allegations of market manipulation.
Business as usual.
This is the reason why the BRICS setup their own version of the IMF.
dereksatkinson wrote: That being said, the macro environment does matter for businesses and most certain does impact if and when layoffs occur. During an expansion, you don't see "efficiency" moves like the one MSFT just did.
"I'm not saying there's any cause and effect, but look at this cause and effect".
I agree there are problems with MSFT. However, MSFT is up around 19% on the year as I'm writing this. Could that be another sign of the herd not paying attention to fundamentals?
Or, as you've already been told, layoffs are not directly related to a company's health. For example, Microsoft recently ended support for windows XP, which seems like a perfectly reasonable thing to do with an obsolete product. So now everyone who was working on windows XP is redundant, along with the support staff for that part of the company. And those layoffs would have absolutely nothing to do with the company's future development or any current products. In fact they might justify an increase in stock value, since profits might increase based on cutting those redundant salaries. Now, obviously I'm just making this up as an example, but the point is you have to go into more detail and ask WHY a company cut jobs. If you just assume that layoffs = bad then your "fundamentals" are nonsense.
Now, a general trend of layoffs is a bad sign for the economy, but that's very different from trying to turn every random hiring or firing decision into some kind of meaningful comment on the market as a whole. You're just doing the equivalent of those morons who say "the market declined as a result of {team} losing {sporting event}".
It is alleged that traders used online chatrooms to plan the fixing of benchmark prices.
Fantastic, we should then have full and comprehensive records of what exactly was said, when it was said, and what every person in the world was doing when it was said.
dereksatkinson wrote: I never said it was a macro-economic indicator, it was tongue and cheek sarcasm. There was no implication of cause and effect. It's just a sign of the times.
Once again, picking out a single piece of news in a whole world of financial news is junk. There's a couple of thousand little pieces of news floating around at any one time - you want to find some bad news you'll find it, just as people who want to find good news will always find some. And given the world is basically never completely fine or completely ruined, both the eternal optimists and the eternal pessimists are pretty much going to be wrong all of the time.
It is bad to be wrong all of the time, and so you should stop it.
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Peregrine wrote: Now, a general trend of layoffs is a bad sign for the economy, but that's very different from trying to turn every random hiring or firing decision into some kind of meaningful comment on the market as a whole. You're just doing the equivalent of those morons who say "the market declined as a result of {team} losing {sporting event}".
Yep, or to take another example from this thread - 'the small cap market dropped because of a wobbly Portuguese bank'.
There's a point where financial narratives writers are pretty much indistinguishable from conspiracy theory nutters.
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dereksatkinson wrote: That being said, the macro environment does matter for businesses and most certain does impact if and when layoffs occur. During an expansion, you don't see "efficiency" moves like the one MSFT just did.
No, that's just not a thing at all.
First up, not every industry is defined by the economy as a whole. An overall economy can be flatlining while a specific industry can be expanding rapidly - have you been paying attention to US oil & production lately? At the same time, an economy can boom while certain industries continue a long term decline, or undergoing a transfer from labour intensive to capital intensive production. An example of the latter is coal - from 1980 to today the US economy has grown about 2.5 times in real GDP, but employment in coal has declined to about 30% of its peak employment, 250k jobs is now about 75k jobs.
And then we have to consider individual companies, which can grow or shrink not in direct relation to the industry they are in. And then on top of that you have to realise that single instances of hiring and firing aren't necessarily indicative of an overall trend - a company might be on an overall growth trend but might shed jobs on one project or operation while still undertaking overall growth.
At which point you should start to realise your claim above, that efficiency cuts don't happen in expansion is just the wrongest of wrong things.
(Reuters) - Portugal's president warned on Monday that fallout from the financial troubles of the founding family of Banco Espirito Santo (BES) could affect the wider economy, while the bank said it was appointing a special financial advisor to help boost its capital structure.
President Anibal Cavaco Silva is the first high-profile politician to warn of a possible economic impact from the Espirito Santo crisis, after the family asked for creditor protection for one of its key holding companies on Friday.
Last week another of the family's companies failed to repay on time over $1 billion in debt owed to Portugal Telecom, which had a knock-on effect on the latter's merger with Brazil's Grupo Oi, forcing it to take a cut in its stake in the new entity.
"If some citizens, some investors suffer significant losses (from the Espirito Santo group) they may delay investment decisions, or some of them may find themselves in very big difficulties," Cavaco Silva said in comments during a visit to South Korea, which were aired on local television.
"We cannot ignore that there will be some impact on the real economy."
Portugal, which in May emerged from an EU/IMF bailout it had to take during the euro zone debt crisis, is expecting its economy to grow by 1 percent this year, the first year of growth since 2011.
BES, Portugal's largest listed lender, is under scrutiny following disclosures of financial irregularities at Espirito Santo International (ESI), which filed for creditor protection in Luxembourg on Friday. ESI indirectly owns 49 percent of the company that holds the Espirito Santos' stake in BES.
The troubles have shaken financial markets outside Portugal, although government bonds, which initially took fright, have since steadied.
BES was controlled and managed by the Espirito Santo family until just a few weeks ago, but they have since reduced their stakeholding and left top jobs at the bank. Respected economist Vitor Bento is the new chief executive after Ricardo Espirito Santo Salgado, the family patriarch, resigned from the position.
Bento told clients in a message on Monday that he was "working hard to regain the confidence of markets, to generate sustainable benefits and to open a new chapter for the bank".
The bank also said on Monday it was finalising the appointment of a special advisor that would help it to better structure its capital base.
Portugal's central bank has said BES has enough capital to cope with any losses resulting from the fallout of the financial troubles of the family, whose companies owe the bank 1.2 billion euros, and that it could tap private investors if there is a further need.
BES raised 1.045 billion euros in a capital increase in June but subsequent details about its lending to Espirito Santo family companies and its troubled operations in Angola raised fresh questions about whether it needs more.
So now that's 3 entities all going under because of a single company having a capital shortfall. Pray it doesn't jump to Spain or Italy.
When I think about global stock markets these days, the image that springs to mind is the final scene of The Italian Job — the 1969 original, not the tacky 2003 remake.
‘Hang on a minute, lads,’ says Charlie Croker, Michael Caine’s heistmaster-in-chief, as he and his rogue brethren balance precariously in a bus loaded with gold on the edge of an Alpine cliff. ‘I’ve got a great idea.’
There’s no shortage of commentators (and stockbrokers) insisting the outlook is rosy and share prices will keep on rising. And almost all political punditry assumes the UK economy is improving fast and, as next May’s general election approaches, will get better still.
Yet alarming evidence is amassing that the global recovery is shaky, stock markets are over-hyped and the large western banks, for all the talk of reform, remain a serious liability. The reality, and it gives me no pleasure to write this, is that we could see a re-run of the ghastly credit crunch of 2007/08.
There's an old line about people who've predicted 1,298 of the last two market crashes.
Keep saying it, over and over again every single fething day and sooner or later you'll be right. And then the job is to con everyone in to forgetting that you were wrong for a long time before you got it right once, and then trick everyone in to forgetting all the gains made when the market wasn't crashing that vastly exceeded the short term loss.
Well you guys are doing the first part, but the tricky part is when the market does finally wobble in the direction of your predictions.
At some point in the future, the stock market will go down.
When I'm proven right, I would like you people to give me all of your money, so that I can "invest" it. The current investment that I'm looking at is a 15,520 sqft mansion in Los Angeles at 384 Delfern Dr. The asking price is 75 million, but I think I can negotiate down to an even 70. That might seem like a lot, but consider that its a 10 bedroom 7 acre property in LA.
LoneLictor wrote: At some point in the future, the stock market will go down.
When I'm proven right, I would like you people to give me all of your money, so that I can "invest" it.
Being able to explain when and how something is going to happen isn't a case of a broken clock.
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Meanwhile.. In Portugal.. The President of Portugal is warning that the failure of Espirito Santo (now blowing up their holding company) is a systemic problem and is likely to spread to other nations. Specifically Italy and Spain.
Euro went from 1.35 to 1.05 since June.. Basically straight down since I started talking about it here. It's almost as if I picked the exact moment where the European banking system started collapsing on itself or something..
Most likely they are done with the Euro for now but the next crisis should be the US dollar probably starting later this year and that should be similar to how the crisis in Europe went where there were phases. Pretty soon here the equity markets will wake up to the impact of these currency changes and how it impacts corporate earnings and we should have a correction again. Not a crash but at least a correction.
Now it's pretty much just a waiting game as the damage has already been done. This is going to get ugly.
That’s not how it works. That’s not how anything works. Saying that the euro has declined (by comparing it to the USD) and then saying that the next to fall will be the USD is straight up gibberish.
Currency price is given by comparing to another currency. The decline in the Euro is also, in the exact equal amount, a story of appreciation of the USD. The little story could be just as equally told as ‘USD has surged in value, from able to buy 1.05 Euro to 1.35 today. Next in line to surge is the Euro.’ And I hope you realise how ridiculous that is.
The actual story of the declining Euro is that Europe simply hasn’t recovered from the slump, while the US is in the midst of recovery. Improving US economy compared to Europe sees the USD rise in relation to the Euro.
